Royal Mail’s CEO has defended the company’s modernisation efforts, and called for lighterregulation that reflects the role of mail within a much larger communications sector.
Moya Greene, who joined the UK postal operator in July after five years as head of Canada Post,said the modernisation programme at Royal Mail had “surpassed any other I have seen”, and claimedthat attempts to characterise the company as uninterested in change were difficult to take.
She told this week’s ‘The Future of UK Postal Services’ conference: “We are making greatprogress at Royal Mail – more than most people in this room would realise. Our approach tomodernisation is creating some of the most efficient processes in the world. We are starting to getinternational recognition for what we are doing, and I would like to see some of that in the UK,rather than people just saying: ‘Royal Mail must become more efficient’.
While there was still much more to be done, she said it was important to recognise the challengeof implementing massive changes while maintaining services “and taking our people with them”. Sheadded: “It is like changing the engine of a racing car that is still going round the course.”
She recognised the challenge that regulators faced in coming up with a new regulatory regime ina rapidly changing market that was shrinking year-on-year, but said the slow pace of regulatoryreform was seriously undermining the company’s ability to perform efficiently.
Welcoming the decision to switch the sector from regulation by Postcomm to the UK communicationsindustry regulator, Ofcom, Greene urged government and regulators use the opportunity “to look atmail as a very small part of a very large communications market, and a business that no company candominate because it is changing so fast”.
She added: “Why, for example, would the direct marketing mail market be regulated at all, whenit is in competition with so many other things?”
Tim Brown, CEO of Postcomm, responded: “We agree that Royal Mail has been modernising, butbelieve it needs to continue and continue quickly. We do regulate far too much of what Royal Maildoes – some estimates suggest we regulate 85% of what it does – and we have been trying to changethe regulation and make it more appropriate since 2007.”
That process had been difficult due to two Hooper reviews, two bills and an election, heclaimed.
“But the current price control mechanisms should have finished in April just gone. So, we arelate,” Brown acknowledged. “The challenge now is to make sure that there are no further delays dueto another bill and the transfer to Ofcom and we are working very closely with Ofcom to make surethere is no delay in getting the appropriate regulation in 2012.”
But with Royal Mail still controlling 99% of the downstream mail market, there was clearly stilla need for regulation, Brown added.
“We only want to regulate for two things: to protect the USO; and when the market fails. That isthe only place regulation should be. But to do that, we have to put certain things in place, and wehave a simple request – to know where Royal Mail makes and loses money. And Royal Mail hasmade huge strides over the last few months on its costing structure. We are very pleased to seethat.”
The other key thing, the holy grail for regulators, was getting a regulatory structure that wasflexible and resilient, said Brown.
“What was right in 2005 is definitely not right now, and having to go through a huge processthat takes two years, just to change the regulation because the market has changed, we recognisethat is not right, and the market recognises that.”
Brown said the approach, therefore, was to identify where Royal Mail has market power, work onhow to introduce light touch regulation, and what safeguards to put in place.
“Our move towards light-touch regulation is part of a two-year programme that Ofcom will nowfinish,” added Brown. “Our approach for 2011 was to put the right regulatory safeguards in place,and then deregulate where we can. Our proposals are to remove the price control on all packets andparcels down to 500 grammes – that is part of a £5bn market; and to remove the price controls onpre-sorted bulk retail – a £2bn market; and revise the rules on pre-notification to the marketplace, and we have put out some proposals on lessening the burden on Royal Mail, where there isemerging competition. Before this all takes place, Postcomm requires Royal Mail to provide costtransparency – which they are doing – and to commit to accounting separation – which we are indiscussions about.”
